Novated Lease vs. Company Car

Choosing between a novated lease and a company car comes down to understanding their key differences and how each aligns with your business goals. Here’s a clear breakdown to help you decide which option suits your team best.

1. What Is a Novated Lease?

A novated lease is a three-way agreement between you, your employee, and a leasing provider. It allows your employee to salary-package a vehicle, with payments made from their pre-tax income.

Key Benefits:

• Cost efficiency: Reduces payroll tax for employers, and provide the ability to claim GST on employee novated leases.
• Employee ownership: The car belongs to the employee, not the business.
• Flexibility: Employees can take the lease with them if they change jobs.
• Low admin: The leasing provider handles maintenance and running costs.

2. What Is a Company Car?

A company car is owned and managed by the business. It’s typically provided to employees as a work vehicle or as part of their benefits package.

Key Benefits:

• Full control: The company decides how the vehicle is used.
• Asset retention: The car remains a business asset.
• Wide applicability: Suitable for roles requiring dedicated work vehicles.

3. Key Differences at a Glance

Ownership:

• Novated Lease: The employee owns the car, giving them more freedom.
• Company Car: The vehicle is owned by the business.

Cost Responsibility:

• Novated Lease: Costs are covered by the employee through pre-tax salary deductions.
• Company Car: The employer is responsible for all expenses.

Tax Benefits:

• Novated Lease: Reduces payroll tax and can lower Fringe Benefits Tax (FBT).
• Company Car: Limited tax benefits with more FBT implications.

Flexibility:

• Novated Lease: Employees can take the car with them if they change jobs.
• Company Car: Use is typically restricted to business purposes.

Administration Effort:

• Novated Lease: Minimal effort, as the leasing provider manages most tasks.
• Company Car: High, as the business handles all maintenance and compliance.

4. Which Option Is Best for Your Business?

If you’re looking for a low-cost, flexible way to reward employees, a novated lease is often the smarter choice. It shifts costs and ownership to the employee while still offering significant perks.

Company cars, on the other hand, are ideal for roles requiring dedicated work vehicles or businesses that want full control over their fleet.

How Clear Lease Helps You Decide

At Clear Lease, we specialise in making novated leasing simple and accessible, helping you provide a valuable employee benefit with minimal hassle. If you’re unsure whether a novated lease or company car is right for your business, our team can guide you through the decision.